Recent Developments in Construction Law

Construction law is constantly changing. A savvy contractor keeps abreast of those changes and adapts his or her business methods to conform to new requirements. Here are some recent legislative updates and court decisions that may affect your business.

Economic Loss Doctrine Does Not Bar Contractor’s Claim Against Architect for Tortious Interference with Contract
A Delaware court recently allowed a contractor’s claim to proceed against an architect for intentional interference with contract despite the argument that it violated the economic loss doctrine. In Commonwealth Construction Co. v. Endecon, Inc., 2009 WL 609426 (Del. Super. Ct. 2009), a church hired a contractor to perform renovation work under a contract that provided that in the event of a dispute, the matter would be submitted to the architect, who would then decide the dispute in good faith and without partiality to either party.

A dispute arose concerning payment. Based upon the architect’s advice, the church refused to pay and a mechanics’ lien was filed. Ultimately, a judgment was entered in favor of the contractor, who then sued the architect for tortious interference with contractual relations.

The architect moved to dismiss arguing that the claim was barred by the economic loss doctrine, which bars recovery in tort for damages unrelated to a claim for personal injury or damage to other property.

The court allowed the contractor’s lawsuit to proceed holding that the economic loss doctrine did not apply to claims for intentional torts such as defamation, fraudulent inducement of breach of contract, intentional misrepresentation and intentional interference with contractual relations. While the architect argued that his advice was truthful, honest and within the scope of his duties, the contractor’s complaint alleged the opposite. Ultimately, the court found that early dismissal of the case was improper because the court, in a motion to dismiss, is required to accept the allegations of the complaint as true.

Contractor Cannot Recover Compensation Unless Licensed At All Times During Performance
In Goldstein v. Barak Construction (2008) 164 Cal. App. 4th 845, plaintiff homeowners filed an application for a Right to Attach Order and an Order for Issuance of a Writ of Attachment against a contractor and his business. The court granted the application against the business and ordered the contractor not to sell, encumber, or diminish the value of his residence until further order of the court. The contractor appealed.

The court concluded that the homeowners’ claim against defendants was one on which attachment could issue. The homeowners provided evidence that the defendants were unlicensed at the time a home improvement contract with the homeowners was executed, and performance under the contract commenced while the defendants were still unlicensed. The record also showed it was not until several months afterwards that defendants obtained their license. The Court found that the homeowners presented a prima facie case under Bus. & Prof. Code, § 7031, subd. (b), of the Contractors’ State License Law justifying the issuance of a right to attach order. In addition, because defendants were not licensed at the time performance under the contract commenced, they were not entitled to any recovery for work performed even if they obtained their license during construction. “Extras” undertaken in furtherance of the contract were subject to the licensing requirements. That defendants may have undertaken work for the homeowners not strictly listed within the four corners of the parties’ written contract would not forestall application of the licensing law to such “extras.”